Why property market is heading back to the future

Remember that car made in Belfast which proved to be such a lasting hit in the Back to the Future trilogy of movies? The DeLorean time machine that could transport Marty McFly back to the past? Well, it appears you really do not need one to travel back in time when it comes to Belfast and the local property market.

Not only have values failed to recover since the shortlived property bubble burst seven years ago, but a once-familiar name that disappeared in 2003 is now popping up everywhere across the city again.

It is hard to miss the the billboards and property signs proclaiming the return of Lambert Smith Hampton (LSH) return to the North.

One of the largest commercial property consultants in the UK – it advised Cerberus Capital Management on the £4.5 billion acquisition of Nama's Project Eagle portfolio – LSH recently bought the commercial division of the Northern firm BTW Shiells.

LSH had been a leading player on the local property scene for 15 years before it decided to leave in 2003, giving its then Belfast chief executive, Keith Shiells, and his team the chance to initiate a successful management buyout.

Why return?

So, more than a decade later, why has LSH decided to return? Shiells believes the move is a significant indication of where the North's commercial property market is heading. "We're beginning to see the ripple effects of what's been happening in the Dublin market over the last 12 months, and while I don't believe we'll see a repeat of what happened in 2006-2007 in Northern Ireland, there is lots of investor interest," he said. "The economy is improving, house prices are improving and investors, particularly listed property companies, are certainly looking at Northern Ireland."

Shiells is better placed than most to predict where the market is heading. He has been in the business since 1979 and there is a good chance, with his specialisation in shopping centres and acquisitions, that whether you live in the North or the South, he has helped to shape your shopping experience. He was involved in Jervis Shopping Centre in Dublin and Victoria Square in Belfast.

In the past couple of years Shiells has also seen more than his fair share of post-credit crunch Nama transactions, a trend he expects to continue.

"We are currently involved in a couple of very interesting situations with Irish banks and London-based opportunities," he said. "I think most banks are following Nama's lead. They want to shrink their loans, so we'll see more loan sales. Look at what RBS are doing with the Project Achill portfolio."

It is expected that this portfolio, valued at more than £1 billion, will include Ulster Bank loans connected to developments in the Titanic Quarter and the Waterfront Plaza in Belfast and Ards Shopping Centre in Newtownards. According to Shiells, commercial property values in Northern Ireland today are closer to what they were back in 2001 and 2002.

“I still maintain that what we saw in 2006 and 2007 was a debt-fuelled property bubble,” he said. “What we are seeing today is much more prudent investment. Banks are still very nervous about property, and really the investment interest is coming from the likes of United States and UK-based funds . . . and these funds are pretty selective.”

Belief in the North

Shiells believes that deals such as the £10 million acquisition by Threadneedle Investments of James House in the Gasworks in Belfast this year and New River Retail's multimillion-pound acquisition of the Abbey Centre shopping development in Newtownabbey last month show that investors believe the North will deliver returns for them.

He also expects that any move towards a lower rate of corporation tax in the North will stimulate the commercial property market because there is already strong demand.

Although he admits that the return of LSH to the Northern Ireland market may create a sense of deja vu, Shiells says he is only looking to the future.

But if he did have the chance to borrow Marty McFly’s DeLorean, where would he go? Probably back to Ards Shopping Centre in 1984, where he could relive his first £10 million deal when he brought Land Securities to Northern Ireland.